Analysis of company performance

Wally is impressed by the quality of your analysis. He needs some additional help this time with evaluating how one of his companys - Timmys Baked Goods (TBG) - is performing. TBG is a chain of bakeries operating across Canada. Wally has asked you to perform some financial statement analysis. He asks that you look at how the company has performed relative to history and industry benchmarks. He wants you to calculate the following ratios for each of 2018, 2019 and 2020, using the data he provides below. Be sure to comment on what you think the results mean. He has also included industry information that you can use in your analysis. Note that for the ROA and ROE, you should use the average total assets and the average total equity in your calculations. For turnover ratios, please also use the average. (e.g., for Accounts Receivable Turnover, take Credit Sales / Average Accounts Receivable for the year).

1. Current ratio
2. Account Receivable turnover days; all sales are credit sales
3. Accounts Payable turnover days
4. Debt ratio
5. Operating Profit margin
6. Return on Assets
7. Return on Equity

Timmy's Baked Goods Comparative Income Statement ($M) for the years ended Dec 31, 2017 to Dec 31, 2020 2017 2018 2019 2020 Sales $ 57.43 $ 59.89 $ 145.09 $ 158.67 Cost of Goods Sold $ 41.94 $ 42.09 $ 101.38 $ 111.91 Gross Profit $ 15.49 $ 17.80 $ 43.71 $ 46.76 Selling and Admin Expenses $ 11.47 $ 12.01 $ 20.83 $ 25.11 Depreciation $ 1.51 $ 2.71 $ 4.31 $ 4.18 Operating Profit $ 2.52 $ 3.08 $ 18.57 $ 17.48 Interest $ 1.88 $ 2.51 $ 7.10 $ 4.94 Earnings before Taxes $ 0.63 $ 0.57 $ 11.47 $ 12.54 Taxes $ 0.20 $ 0.18 $ 3.67 $ 4.01 Net Income $ 0.43 $ 0.39 $ 7.80 $ 8.53 Timmy's Baked Goods Comparative Balance Sheet ($M) for the years ended Dec 31, 2017 to Dec 31, 2020 2017 2018 2019 2020 Cash $ 2.15 $ 4.11 $ 5.16 $ 7.71 A/R $ 9.00 $ 9.71 $ 16.98 $ 17.08 Inventory $ 3.42 $ 15.93 $ 16.54 $ 15.86 Total Current Assets $ 14.58 $ 29.75 $ 38.67 $ 40.65 Land, Plant & Equipment $ 10.86 $ 32.46 $ 36.84 $ 35.60 Other Assets $ 0.49 $ 1.08 $ 1.68 $ 1.76 Total Assets $ 25.93 $ 63.29 $ 77.19 $ 78.01 A/P $ 10.75 $ 18.15 $ 22.43 $ 21.99 Current Portion of LT Debt $ 0.58 $ 3.62 $ 3.75 $ 2.86 Total Current Liabilities $ 11.33 $ 21.76 $ 26.18 $ 24.86 Long-Term Debt $ 10.56 $ 37.09 $ 38.77 $ 32.40 Total Liabilities $ 21.89 $ 58.85 $ 64.95 $ 57.25 Shareholders' Equity $ 4.04 $ 4.43 $ 12.23 $ 20.76 Total Liabilities and Equities $ 25.94 $ 63.29 $ 77.18 $ 78.01 Industry Benchmarks 1.35 0.25 40.12 34.5 50.1 3.5 Current Ratio Cash Ratio Inventory Turnover (days) AR Turnover (days) AP Turnover (days) Fixed Asset Turnover Total Asset Turnover Debt Ratio Times Interest earned Gross Profit Margin Operating Profit Margin Net Profit Margin ROA 1.75 0.5 10.5 28% 12% 7.50% 15.50% 37.50% ROE 2019 2020 Num Den Answer Key - Timmy's Baked Goods Current Ratio 2018 1.37 1.48 1.64 CA CL 57.01 33.57 Avg AR, all under 365 Net Credit Sales COGS Avg AP, all under 365 AR Turnover - days AP Turnover - days Debt Ratio Operating Profit Margin ROA TL TA 125.29 0.93 5.1% 0.9% 9.2% 73.04 0.84 12.8% 11.1% 93.6% 39.17 72.45 0.73 11.0% 11.0% 51.7% Op Income Net Sales NI Avg TA ROE NI Avg TE